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Guest Commentary — Homeowners Aren’t the Only Ones Hurt by the Mortgage Meltdown
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Editor’s note: From time to time, Flipping Frenzy readers contact us offline to request that they be allowed to ‘guest blog’ an entry or two on a topic related to Real Estate and Mortgage Fraud. One such reader is Clearwater Beach, Florida-based Larry Rubinoff, who serves a branch manager for Mortgage Lending Direct, a dba of MLD Mortgage, Inc. To paraphrase, Larry says that much of the dialogue surrounding the current mortgage meltdown overlooks and ignores the dramatic impact the crisis is having on honest, hard working mortgage professionals like himself.
In his own words…
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The Real Face of the Meltdown
By Larry Rubinoff
There are millions of stories on what this mortgage meltdown has done to our population and to our economy. While we cannot address or recognize all of them, I will attempt to put a “face” on some of them through a series of guest blog entries, as the story cannot be told in just one.
To date, most of what we hear about are the millions of victims (the homeowners) and the hardships many of them are now facing. There are other victims as well who are also facing hardships due to the “meltdown.” One such group are the professional who work in the mortgage industry. The underwriters, the account executives, the loan originators, the processors, the clerks and staff of the hundreds of companies that have gone out of business not necessarily due to their actions or fraudulent deals, but just due to the shrinking of the real estate and mortgage markets. While this shakeout is getting a lot of bad apples out of the business, it is similarly forcing many good people out as well. My business, as well as the business of many of my friends, has shrunk to almost nothing but this does not even address the thousands of employees at the nearly 190 and counting companies that have gone out of business or those who have had to layoff staff just to survive the mess.
Almost 28,000 people per month are losing their jobs in the mortgage industry. Little is said or reported about them. Many of them are not counted in the unemployment rolls nor do they qualify for unemployment insurance. These people, though faceless, are homeowners themselves, and they too are losing their homes to foreclosure. Like many other people nowadays, they are heads of households with kids to support, car payments to make, and bills to pay (which in many cases they cannot, and like others, their credit is being destroyed). I would say that the majority of these newly unemployed were not the fraudsters, just the everyday hard working people putting in their 8 hours plus per day to feed and support their families.
Many of these people have been in the industry for 10 to 20 years and longer. They are now faced with the challenge of finding new careers and job-related training. In each case, this is becoming a difficult task. Many employers (in ads that I have actually seen) will not even entertain an applicant that has been in the mortgage industry. The belief, as has been constantly reported over the past year, is that anyone with mortgage industry experience is a bad apple; and when you stop to think about it, why would anyone want to hire a media-tried and convicted criminal. A Harvard law professor in an article in the Boston Globe even went as far as to say that all mortgage brokers were “crooks” who took Yield Spread Premium (YSP) from lenders which she called “bribes.” The fact is, the overwhelming majority of YSP are just ordinary mark-ups on a product to produce profit much like the can of the corn we typically find on a grocers shelf (which is marked up from their cost to cover overhead and produce a profit).
I know an underwriter who truly is one of the most knowledgeable people I know; someone who worked for one particular company for over 10 years yet was given only 30 minutes notice that her company was closing and she was terminated. I know and am friends with many brokers who are honest and knowledgeable and who always worked for the best interest of their clients — yet they too are now out of work and are faced with the prospect of having to end their careers. My own stepdaughter is even a casualty in all of this. I brought her into the business nearly eight years ago as an administrator and processor, and she ultimately became my director of branch relations. When I relocated my business and she was unable to move with us, she went to work for a former associate of ours. He is one of the good guys who at the end of this month will be closing his doors after over 20 years in the business. While he will be ok, my stepdaughter may not be. She has applied for over 100 jobs, makes at least five new contacts a day, and has not had one response as of yet. She is a single mother of two children, and is extremely well qualified in operations, accounting and administration.
While what is happening to homeowners is truly tragic, we do not hear nearly enough about the professionals who have been similarly impacted (they number well over 100,000 and growing). Sadly, all of us are victims, which is even more reason for all of us–homeowners and professionals alike–to educate ourselves and police our motives and actions.
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To leave a comment for the author: Please click on the “Comments” link below to leave a comment for the author or to share your opinion.
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Don’t agree one bit, these so called professionals have been signing up dead beats for years - for loans they could not afford, and had no chance of ever paying back. Your speaking about 101 ways to rip-you-off -people. They’ve drove house prices up, offered crazy no interest loans, offered loans on 5 times earning, 7 times earnings, inflated values, now the last 20 years of feverish often illegal activity is busting, its raining and they all knew it was coming. All they wanted was a cheque, they never even asked if they’d earned it, was it moral, was it a good deal for all. So it’s pay back time for them.
Barnums men one and all.
Comment by Croc Tears Dry Fast — November 21, 2007 @ 4:48 pm
Larry, thank you so much for putting into words what many of us former mortgage professionals are experiencing. I worked in the “dreaded subprime” mortgage market. The two companies that I worked for over the last 11 years were not unethical nor would tolerate illegal, unethical or any non-benefical loans. One has since gone out of business, the other is barely hanging on and more than likely will close down in December. Thousands of people are now out of work. Sub prime lenders have gotten such a bad rap, some rightfully so, but the majority do not deserve this. Two bad apples started offering ridiculously lax guidelines for borrowers with ridiculously poor credit at much lower interest rates and unfortunately many top competitors had to follow suit in order to compete. One of those apples is now out of business and the other is the subject of many federal investigations and class action lawsuits. But the aftermath remains. (Oh and what about the investors that couldn’t get enough of these loans, why do they get to cry “foul” now?)
So Croc, I completely disagree with your ill informed opinion. Just like every other industry and profession, there are those who are dishonest, unethical and criminal, but the MAJORITY are not. To follow your rationale every used car salesman is a crook out to unload a lemon on the unsuspecting public, every lawyer is an ambulance chaser, every police officer is on the bribe, all doctors practice medicine for the money with no concern for their patients and not one teacher has any concern for educating the students they are paid to teach. Thankfully our world is not as sad as you would have us believe.
Comment by Former Underwriter — November 23, 2007 @ 6:28 pm
Former Underwriter and One Affected:
Thank you for your comments and expanding on my article. You are only two of tens of thousands in the mortgage industry obviously affected by this. By commenting you are putting more of a “real face” on this ongoing saga.
To Croc tears dry fast, I am sorry you feel the way you do. While you are right about some of what has happened, you cannot and should not condem an entire industry and all within it.
What industry are you in? Are there no “bad apples” in your industry? You also missed the point of my article. Tens of thousands of mortgage industry people are out of work and suffering. The majority of these people did NOT earn commissions on each transaction so greed was not an element there.
And this goes even beyond the mortgage industry. Real Estate agents have been adversly affected, title companies and their employees have been affected and find themselves out of work, the construction labor force, etc., etc. etc.
This is a mess but let’s not put the total blame on a very decent profession and industry and especially blanket the blame the the “workers”.
Comment by Larry Rubinoff — November 26, 2007 @ 4:01 pm
Larry-
Like you said..”There are millions of stories on what this mortgage meltdown has done to our population and to our economy”…
The scenario you offerred is tragic for all those professionals …that were the honest “few” good ones…it is too bad that after years and years of dedication to the industry..they are out in the cold…
Comment by K-Legal — December 13, 2007 @ 5:41 pm
K-Legal,
You are so right. I can’t seem to get anyone to focus on this issue. Just the other day WaMu announced the lay off of 3150 people and just before the holidays. First, it is hearless to do at this time of year. Their balance sheet would not have been adversly affected had they waited until after the 1st of the year at lease. Second, WHAT ARE THESE PEOPLE GOING TO DO NOW? Are many gong to find themselves in foreclosure or with repossessions or collections? Of course they are. Most of them are the everyday hard working people of this country that remain faceless but in reality make this country work.
And, oh by the way, WaMu is under investigation for fraud and complicity in fraud along with American Title and AppraiseIt. While I cannot and willnot pass judgement (that is up to our court system to do), it is apparant that there was something going on and if it was then it had to be structured from the top ends of all of the companies not from the 3150 who are now jobless.
Our focus on fraud and victims of fraud (and many are not victims, like Lisa) has been aimed at the most vulnerable group, those at the bottom rung of the ladder. What we are doing is akin to trying to arrest all of the street drug dealers hoping that by doing so it will topple the cartels.
Are we affraid to go after the big guys? New York State is not. How many Enrons are there out there amongst our financial community. Let’s get deeper into this as a nation and take back our rights and control.
Comment by Larry Rubinoff — December 19, 2007 @ 6:19 pm
I suggest, again, you start with the Wall Street Investment Banks.
The justice system is broken, sure there will be a fall guy or two, but business as usual, some fines will be paid without admitting criminal liability and life goes on. The government collects a percent of the stolen funds, the real victims get nothing. AFAIAC, that makes our government criminal.
Case in point Roland Arnell of Ameriquest fame, his punishment, none, he was appointed to be the ambassador to the Netherlands and ameriquest paid a 300 million fine BFD!.
As for all those sleazy mortgage brokers, good riddance. I never used one.
Comment by By Their Fruits Shall You Know Them — December 19, 2007 @ 6:34 pm
I don’t know if anyone is still paying attention to this post but the news just in, CitiGroup to layoff 20,000 employees as a result of thier decling liquidity and value. Singapore and Abu Dahbi are pumping BILLIONS into Citi with the natural outcome of course, total ownership.
How disastrous this continues to be for America and Americans. Can anyone honestly say this is the doing of a loan originator/mortgage broker?
Citi made the loans, packaged loans, securitized loans and couldn’t get enough paper. Many of the lay offs are in their investment banking operation.
But the tragedy, 20,000 more people that will face certain financial hardships. Unemployment is rising, jobs are diminishing and costs for the basics of life are increasing.
I truly pain for them not to mention the many friends and associates I have in the industry now in the same boat. This ride is far from over. This will be a very difficult year indeed.
Comment by Larry Rubinoff — January 15, 2008 @ 3:19 am
You have built a good website
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You guys do a wonderful job! Keep up the good work!!!
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These are two items that can severely hamper the life of a city. ,
Comment by Merlin61 — October 23, 2009 @ 8:45 am